Why Vanguard MSCI Index International Shares ETF (VGS) is a great buy for almost anyone

I love this ETF for its portfolio.

| More on:
A smiling woman with a satisfied look on her face lies on a rug in her home with her laptop open and a large cup on the floor nearby, gazing at the screen. researching new ETFs

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Vanguard MSCI Index International Shares ETF (ASX: VGS) is a high-quality exchange-traded fund (ETF) investment choice, in my opinion. I think it would make a good pick for nearly everyone's portfolio.

For readers that don't know what this ASX-listed ETF does, Vanguard describes it as the following:

The ETF provides exposure to many of the world's largest companies listed in major developed countries. It offers low-cost access to a broadly diversified range of securities that allows investors to participate in the long-term growth potential of international economies outside Australia.

With how it's set up, it would be suitable for a lot of investors, in my opinion.

Great diversification and strong positions

The ETF is invested in 1,433 businesses across the world.

There are numerous geographic markets with an allocation of at least 0.4%: the US (71.5%), Japan (6.4%), the UK (4%), France (3.3%), Canada (3.3%), Switzerland (2.7%), Germany (2.3%), the Netherlands (1.3%), Denmark (0.9%), Sweden (0.8%), Spain (0.7%), Italy (0.7%), Hong Kong (0.5%) and Singapore (0.4%).  

It offers so much diversification that I think this could be used by Aussies as the only way they access the global share market.

The most significant weightings are with incredibly strong tech businesses that have appealing growth potential such as Apple, Microsoft, Alphabet, NVIDIA, Amazon.com, Meta Platforms and Tesla. It's exciting to think what these investments can achieve in the next five and ten years.

We can't know which shares are going to perform the best in the short-term or the long-term, but I think the VGS ETF is well-placed to be invested in solid businesses.

Solid returns

Past performance is not indicative of future performance, but I think the biggest global businesses as a group have the capability to continue to produce good profits and re-invest retained money into more opportunities for a good return within the business (and/or make acquisitions).

Since the Vanguard MSCI Index International Shares ETF started in November 2014, it has delivered an average return per annum of 12.4%.

VGS ETF has low management fees

It makes solid returns and I think the costs are very reasonable considering how much diversification we get from just one investment.

The VGS ETF has an annual management fee of 0.18%, which is one of the cheapest ways for Aussies to get global diversification via the ASX.

It's possible that Vanguard may be able to reduce management fees over time.

Can provide cash flow for income-focused investors

I mentioned that the VGS ETF could work for almost anyone. Its passive income is low in a world where interest rates are higher and savings accounts offer a pleasing return now.

According to Vanguard, it has a dividend yield of 1.9%. That's not very exciting.

But, with the ASX ETF's long-term returns, we could decide to sell some of it each year to create a cash flow.

Imagine starting with a $50,000 balance and it rises by 10% over a year. If someone decided to create a 5% 'dividend yield' of the original $50,000 balance, it would unlock $2,500 of cash flow. This would leave the VGS ETF balance at $52,500 to compound again next year.

I think the VGS ETF can tick the box for people looking for both growth and income.

Should you invest $1,000 in Elmo Software right now?

Before you buy Elmo Software shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Elmo Software wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Nvidia, and Vanguard Msci Index International Shares ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ETFs

Happy man holding Australian dollar notes, representing dividends.
ETFs

How to turn $500 a month into $250,000 with ASX ETFs

This is the easy way to build wealth. Let's see how it works.

Read more »

ETF spelt out with a rising green arrow.
ETFs

Invest $500 into these fantastic ASX ETFs

These funds could be great picks for investors with money to invest in the share market this month.

Read more »

A group of office workers pump the air to celebrate
ETFs

Why VanEck Australian Equal Weight ETF could be a top performing ASX ETF in 2025

This ETF could be primed for a particularly successful 2025.

Read more »

woman talking on the phone and giving financial advice whilst analysing the stock market on the computer with a pen
ETFs

2 under the radar ASX ETFs that are up more than 100% over 5 years

It might be worth adding these two ETFs to your radar.

Read more »

a business person checks his mobile phone outside a Wall Street office with an American flag and other business people in the background.
ETFs

The pros and cons of buying BetaShares NASDAQ 100 ETF (NDQ) units this month

Is this the right time to invest in US stocks?

Read more »

Smiling business woman calculates tax at desk in office.
ETFs

Buying the dip: $10,000 invested in VTS ETF and NDQ ETF at the recent trough is now worth?

Let's do the calculations.

Read more »

ETF spelt out
ETFs

3 compelling ASX ETFs I'd buy for diversification and income

These funds offer a number of compelling attributes.

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
ETFs

3 high-conviction ASX ETFs to buy and hold forever

These funds could be quality picks for investors looking for buy and hold options.

Read more »